'Fed Whisperer': Pressure for Larger, More Frequent Rate Hikes Is Mounting

November 11 - Nick Timiraos, chief economics correspondent for The Wall Street Journal and known as the "Fed whisperer," wrote in his latest article that the rebound in US inflation is disrupting the gradual rate hike pace the Federal Reserve had been trying to maintain. Fed officials spent all of October trying to dispel market expectations of rapid consecutive rate hikes in the near term, but the latest data did not cooperate with that effort.

Data released by the US Labor Department on Tuesday showed that the core Consumer Price Index (CPI), excluding food and energy prices, rose at an annualized rate of 3.7% in the three months through October, markedly faster than the 1.6% pace in the three months through July. The report further reinforced market expectations for a rate hike at the Fed's December 8-9 meeting. The real debate has shifted from whether to raise rates to how quickly monetary policy should be tightened.

The article noted that the Fed currently faces two options: continue with the previously envisioned pace of two to three more rate hikes of 25 basis points each; or accelerate action by raising rates consecutively or even delivering a one-time 50 basis point hike to proactively suppress economic activity and inflation. On Tuesday, statements from multiple Fed officials showed that the latter possibility is gaining more attention.

The article said the core dilemma facing the Fed is now clear: inflation continues to spread, demanding faster central bank action; while cooling AI investment and tightening financial conditions increase the risk of over-tightening. Whether the December meeting opts for a one-time 50 basis point hike or two consecutive 25 basis point hikes will be an important test of the Fed's policy trade-offs.